The European Union is to announce sanctions on some 200 Iranian firms and
individuals as Western nations further tightened the screws on Tehran over
its nuclear programme.

They will be added to a list of those already targeted by a visa ban and businesses facing an asset freeze which will be announced by EU foreign ministers next month, according to EU sources.

One EU diplomat said members of the 27-nation bloc were also debating whether to also target "new areas and industry sectors", which could include oil.

On Monday Britain severed all links with Iranian financial institutions while Washington announced further sanctions on Iran’s financial sector and petro-chemical industry, which has been used to circumvent measures against the nuclear industry.

Canada has halted "virtually all transactions" with the Islamic republic while France has said it too was "in favour of new unprecedented sanctions" and called for an embargo against Iran's most vital export: oil.

Western powers have increased the pressure on Iran following a Nov 8 report by the International Atomic Energy Agency which concluded that elements of the country’s nuclear programme were solely suited for “weaponisation”.

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Iran has dismissed the report and yesterday labelled the new sanctions as "propaganda and psychological warfare".

Russia, its closest ally among world powers, aid the sanctions were "unacceptable and against international law". Together with China, Moscow has blocked any movement towards a fifth round of sanctions at the UN Security Council, where both countries hold veto power.